Mike Maloney

Hidden Secrets of Money video series explains economics and monetary history in a very entertaining way.

The mission of the series is to enlighten the world that maximum prosperity can only be achieved through individual freedom, free markets, and sound money.

Mike is a fundamentalist. He sees P/E ratios at insane levels and dividend yields at insanely low levels. Robert Shiller has records going back 130 years, and the first 118 years we’ve never been in a bubble as big as we are today.

STOCKS AND REAL ESTATE

Mike would not get involved in stocks at this level.

Regarding real estate, using Robert Shiller’s data, shows we’ve come from the biggest bubble in history, down to fair value, and bounced back into a small bubble.

After a major bubble, you have to have the excesses flushed out, excess inventory and excess jobs in the sector, and they have not been flushed out yet.

Mike believes there is a tremendous opportunity coming up in both real estate and stocks but not until after gold and silver go into their bubble.

He believes that will be one of the greatest bubbles in history and is some day in the future.

Mike has been accumulating precious metals since 2002 and says he doesn’t intend on being flushed out of this bull market until it reaches overvaluation.

GOLD AND SILVER VALUATION

By no means are gold and silver overvalued.

Measured against the expansion of the currency supply, and price inflation, it suggests that gold and silver are severely under valued.

Mike expected a pull back in gold, just as it did in 1975-1976 where it fell from almost $200 per ounce down to $100 per ounce.

Cyclical bear markets are necessary inside of a secular bull market to flush out the speculative money. There were too many get-rich-quick money trying to chase gold and silver.

Mike only buys physical metal.

THE FUTURE CONVERGENCE

There is an enormous convergence coming.

Mike believes in waves and cycles. He researched the monetary crisis and crashes throughout U.S. history, looking for cycles, and found that every 30 – 40 years the world has a new monetary system.

The classical gold system before WWI.

The gold exchange system between the wars.

Bretton-Woods from 1944 – 1971.

Now we have the worldwide U.S. dollar standard.

The current standard is developing stress cracks and beginning its implosion.

We’re going to have a shift in world monetary standard. Countries all over the world are turning their backs on the U.S. dollar.

It’s happening rapidly now and every month there’s another country that’s doing a bi-lateral trade agreement.

It’s happening at the same time as the U.S. is coming off the largest real estate bubble in history, and the stock market has been in a persistent bubble since 2000.

The greatest bubble is the credit bubble, the bond bubble, and it’s been inflating since 1980 without taking a breath.

On top of that is the fiat currency bubble.

Every country on the planet is printing their currency into oblivion.

So you have a convergence of all of this happening at once.

Mike believes you will see something really big between now and the end of the decade.

NEW MONETARY SYSTEM

There will be a new monetary system.

There will be an emergency meeting of the G20
finance ministers, just like the General Conference in 1922, the Bretton-Woods conference in 1944, the Group of 10 and the Smithonian Agreement in 1971.

It is just history repeating.

The other ones were baby steps off of gold.

Full backing with gold with the Classical System, 40% backing of gold mixed with bonds and other currencies in the InterWar System, no specified ratio under the Bretton-Woods, so it started at 40% and fell to 8% before Nixon took us off of it.

Now we are backed by debt.

There is no backing now other than the promise to tax our populations in the future.

When a currency is backed by bonds, a bond is just an IOU: the treasury of that country is borrowing against the future.

Every dollar in circulation comes with the promise to tax you until the day you die.

When everything fails they will be looking around for what worked before.

If we go from just debt backed currencies back to something to something where there’s some partial asset backing it’s going to be a global, worldwide financial convulsion the likes of which we’ve never seen.

Mike believes this will affect everyone on the planet whether you want to participate in it or not.

The people who see it coming and put themselves on the correct side are going to do very well but the masses are not.

FUTURE PRICE OF GOLD

Mike measures gold and silver in purchasing power.

If you measure it in the DOW ratio (now at 11), or the real estate ratio it should buy between

The DOW ratio was at 2 in the Great Depression and was at 1 in 1980. The points on the DOW were the same as the price of gold. He believes it will go to one half to one, and you’ll see the day where gold doubles the DOW.

HISTORY OF GOLD

We’re coming off of the greatest bubble in history.

There’s no time in history where paper assets were more over valued than during the NASDAQ bubble in 1999 to 2000.

There’s no time in the last 5,000 years where gold was under valued as 1999 to 2000.

For 5,000 they’ve been the predominant currency. For 2,000 years they’ve been money.

Since 1971 countries abandoned gold as money. It went into a small bubble in 1980, then a brutal bear market for the next twenty years. So by the year 2000 nobody wanted gold.

No country and no investor.

It’s the first time it isn’t connected to the currency of every nation on the planet.

Gold hit an all time low in value in 2000. A five thousand year low.

We’re reverting and it should be one of the biggest reversions in history.

UNFOLDING DOLLAR IMPLOSION

Mike sees more of what we are experiencing now: talking heads tell you everything is great and recovering, and then another crisis.

Then they say it’s recovering, then another crisis even worse. And the frequency of those will happen more and more often.

Mike then sees that there will be something that happens overnight.

He thinks you will wake up one morning and gold will be double the price, or many times the price. Then there will be the emergency meeting of the G20 finance ministers, and it will be a repeat of 1922, 1944 and 1971.

FIAT CURRENCY

This is the first time in history that all currencies are fiat currencies all at once.

The history is that each country had its own currency backed by gold in their own treasuries. Then a mix of gold with U.S. bonds, U.S. currency and British bonds and British currency. Then all the countries backed their currencies with the U.S. dollar under the Bretton-Woods system, and the U.S. paid out gold against dollars to any Central Bank that was going to cash in their U.S. dollars.

Now we’re on this global dollar standard.

There is no history before 1971 of a fiat currency surviving.

When Nixon severed the tie between dollar and gold, since all other currencies were pegged to gold through the U.S. dollar, he unknowingly began an experiment on a global scale that had already been proven to failed time after time, thousands of times.

It’s a 100% failure rate.

No fiat currency has ever survived.

Now, all of them at fiat.

BIGGEST SHIFT IN MONETARY HISTORY

Mike believes when this happens it will be the biggest shift and the greatest wealth transfer in history.

Therefore he sees this as the greatest opportunity in history.

WHAT THE MONETARY CRASH MIGHT LOOK LIKE

Mike believes it all depends on how long it takes the finance ministers to stop the event and make the shift to a new monetary system.

The longer it takes the lower the purchasing power of the currencies will be and the more of a crisis it becomes.

You could wake up one morning and the purchasing power of your dollar against gold could drop by half, or three quarters or 90%. You could wake up one morning and gold is at some astronomical figure.

Or, maybe they’ve pegged the dollar to gold, and the dollar is stable, but you have $10,000 or $20,000 per ounce gold.

In Mike’s book he did an analysis of how many dollars were held by foreign central banks, divided by the ounces of gold in the U.S. treasury.

To get a fully backed U.S. dollar exchangeable to central banks only, not all the currency in existence, just the amount being held by foreign central banks, it took $20,000 per ounce gold back at the time he wrote his book.

Mike foresees gold well north of $5,000 per ounce.

The more you study gold, the more the predictions of $2,000 or $5,000 per ounce gold become absurdly low.

THE DERIVATIVES MARKET

The derivatives are a disaster waiting to happen.

At the last crisis we had, one of the root causes was AIG not being able to cover all of their bets. They were one of the entities that were bailed out by the Federal Reserve.

AIG made a whole bunch of derivative bets and they didn’t have the backing to cover those bets. They didn’t believe all their bets could go south on them at the same time.

It threatens to bring down the entire financial system and there would be no recovery from that, as far as just getting the same system going again.

It would require going onto a new system and wiping out all the debts and starting all over again.

CONFISCATING GOLD?

The IMF has already done a rehearsal for confiscating bank accounts. That was Cyprus. And there are countries that have nationalized retirement accounts.

Mike believes it will happen in the United States if we have a big derivatives melt down.

Mike does dollar cost averaging when he purchases gold and silver personally, on a regular basis. But when Cyprus confiscated bank accounts he took whatever currency he had left and turned it into precious metals.

It wasn’t Cyprus that confiscated the bank accounts, it was the International Monetary Fund. So he believes it’s possible for it to happen in a major power like the United States or the Euro zone.

He believes there will be a shift in the world monetary system one day, and it could be a very chaotic event.

It’s dangerous to swim near a drowning man – they can pull you under.

Most governments are the drowning man.

OWNING PRECIOUS METALS

Mike believes that owning precious metals is one of the private ways of storing wealth.

He sees it as more than just storing wealth or protecting yourself, he sees what is coming as the greatest opportunity that has ever presented itself in history.

NO GOLD AVAILABLE

The day is coming.

China has gone from being insignificant, when it comes to gold, to becoming the world’s largest gold producer, and none of that gold leaves China. They are also simultaneously the world’s largest gold consumer.

At this time, since the price has dropped, there are less people buying in the United States, and when the price rises to the place where they originally bought, they are selling thinking they are breaking even.

The pull backs are the time to buy.

THE MIDDLE CLASS, HISTORY AND HITLER

There are a lot of really big buyers of silver out there. There aren’t quite as many of the middle class. If the middle class doesn’t protect themselves, if we lose the middle class through this crisis, then they tend to vote very differently if they are improverished.

This is where Hitler came from.

It is where Mao came from.

There were two hyperinflations during the French Revolution that directly led to the rise of Napoleon.

They vote for a very charismatic person who says if they follow him, he will show them the way out of this predicament.

There is a huge potential for it to happen if we go through the financial convulsion that Mike is talking about; this shift in world monetary system, if the middle class has no gold or silver.

You’re going to see currencies lose a lot of purchasing power, and you’re going to see precious metals gain a lot of purchasing power.

SYRIA

The short term noise in this, is that if there is a financial catastrophe you can bet that they will be attacking Syria.

It works well to take the public’s eye off the ball by getting involved in war.

Mike doesn’t know and doesn’t follow too closely, he looks at the fundamentals of the global economy.

Regardless of whether this price pull back continues for a while, or whether it’s already over with and it’s up from here, gold and silver are going to go to some astronomical places because they are doing an accounting of the expansion of the currency supply, since the last time they did an accounting.

The last accounting was basically 1980.

So we’re making up for all the currency that’s been printed in the last 30 years.

Gold isn’t even double it’s 1980 price.

Silver was $50 in 1980 and it’s less than half that. Can you name anything else on the planet that is half of its 1980 price?

They are insanely undervalued because they haven’t kept up with the inflation of the currency supply, which caused the inflation of prices.

Real estate is up ten fold. Gasoline is $4.00 instead of $0.32.

Everything is many, many times it’s 1980 price with the exception of gold and silver.

MANIPULATION

Gold and silver are a manipulated market but you can’t hold them down there forever because as you expand the currency supply the prices of labour and the price of energy goes up, therefore the cost of production of the commodities rises.

If the cost of production rises and the price is manipulated then it becomes unprofitable. Mines get shut down. We’re seeing that happen right now.

So less production comes to market making the eventual explosion even greater because there’s a shortage just when everybody wants it.

The pull back in price is a good thing for investors in the long run because it will make the price go even higher.

From 2011 to today the gold chart was too perfect. You never have something march forward like that never having a correction or pull back. It causes too many speculators to get in.

It went parabolic in 2011 and now the pull back is happening and it is a healthy thing, and means the bull market will be extended and go higher, and people will have a longer time to get prepared for the shift in monetary system.

In any scenario where there is a possibility of something happening, then there is a range of probabilities within the possibility. Typically it’s a bell curve, with the most likely scenario being somewhere in the middle.

The tail (of the bell curve) risks is what you want to ensure against.

On one end we have everything go along just peachy. The middle part of the bell curve is the financial calamity. And the other end of the tail risk is the possibility of end of the world Mad Max, and we’re going to be bombed back into the stone age financially.

Mike does not believe either end of the tail of the bell curve, but he does have some emergency food that he bought – a couple of months worth. He is not an end of the world person and does not have a year’s worth of food put aside.

He believes there a possibility of social unrest, riot and such, for a week or so, and we could see things like the interuption of the food supply. Any city has about three days of food in it, so it’s a good idea to have some emergency food.

The goldsilver.com added some inexpensive emergency food to its website.

He believes in being prepared and then hopefully you never have to use it. It’s just insurance.

He does not believe the system will break down so far that we are going to be using gold and silver coins in transactions.

He looks at gold as not just a protection of wealth, but as a major investment class at this point. That it has the greatest opportunity for potential gains in purchasing power, of any investment class out there.

There are brief moments in history where precious metals become simultaneously the safe haven asset class, and the asset class that has the greatest potential gains in purchasing power.

You had a month and half in 1934.

You had the eight and half year bull market of the 70s.

And we have the bull market we’re in right now.

Before that gold was always connected with the currency of a country. So when one country would go off of the gold standard, then experience hyperinflation, it would happen only in that country.

So this is a very, very rare thing.

CONFISCATION

The United States is the least likely to have this happen because it’s the only country where the majority of its currency resides outside of its own borders.

Obama and Bernanke don’t have any control of the currency that is outside of the U.S. borders. If Obama signed an Executive Order nationalizing gold, then all of the traders in Moscow and Shanghai, all around the world, would say, “Oh my God there’s something wrong with the dollar. We better get rid of our dollars and buy gold.”. The dollar would crash to zero.within weeks and gold would go to infinity.

Mike hopes the powers that be in the U.S. know that and don’t nationalize it. He says gold was never confiscated, it was nationalized. They requested people turn it in for full face value, then the Federal Reserve melted it down into bars and put it all in Fort Knox to keep it safe for us. The very definition of nationalization. With confiscation they knock down your door, bash you in the head and take it.

Mike suggests that precious metals dealers that use the word confiscation are usually trying to scare you away from buying bullion into buying gold products where they make a huge profit.

He does think that as things get out of control there is that possibility, so he has started buying bullion jewelry, and now sells it on his website, because he’s never seen an example in history where a government confiscated the jewelry of its citizens.

Mike personally has 90% of his holdings as U.S. gold eagles and 10% as bullion jewelry, and with silver it’s about 99% as silver eagles.

The only way he would confiscate gold and silver Eagles is in a circumstance of hyperinflation where they don’t have anything to lose by doing it. At that point most of the wealth transfer will have already be done.

So you just sell them your gold and take their currency and you buy something tangible with it as soon as possible.

Whatever the laws are – obey them. Just try to turn things to your own advantage as much as you can. That means getting in on it now. So if it gets to the day where the currency is crashing and they have nothing to lose, they might nationalize the gold. But not now.

See the bankers wave the Wall Street wands
See the conjured piles of paper green
Now they’re betting all their tricks go wrong
They’re betting the world as you know it
If they win
You lose the whole world as you know it

Ever seen a long con?
Ever seen a tampered wand?
Ever seen the betters sipping tea?
Making bets just sipping tea
Well don’t talk back
Your betters
Your bankers are having a tee, hee, hee

Heyo heyo, just another week on Wall Street
Heyo heyo just another week on Wall Street

A little grease (Greece) is floating out to sea
Little PIGS (Portugal, Italy, Greece, Spain) are bobbing up and down
So send a storm and we’ll see
when the tide goes out who’s naked on the beach

Ever seen a long con?
Ever seen a tampered wand?
Ever seen the betters sipping tea?
Making bets just sipping tea
Well don’t talk back
Your betters
Your bankers are having a tea, hee, hee

Heyo heyo, just another week on Wall Street
Heyo heyo just another week on Wall Street

See the bankers wave the Wall Street wands
See the conjured piles of paper green
Now they’re betting all their tricks go wrong
They’re betting the world as you know it
If they win
You lose the whole damn world as you know it

Ever seen a long con?
Ever seen a tampered wand?
Ever seen the betters sipping tea?
Making bets just sipping tea
Well don’t talk back
Your betters
Your bankers are having a tea, hee, hee

Heyo heyo, just another week on Wall Street
Heyo heyo just another week on Wall Street